The Myth of the Natural Economy

“The general equilibirum view tends to lend support to those who want to make the economy more efficient in the sense of having fewer ‘distortions’—you know, all of these neutral economic words—from taxes, from labor unions, from minimum wages, and so on. Now, what has happened in the last thirty years—and this is what Hacker and Pearson note in their book [Winner-Take-All Politics]—is we have gotten ourselves into a feedback situation. As people have gotten richer, conservative people have funded organizations which generate economic research promoting their political views.”

That’s from an excellent interview with economic historian Peter Temin in The Straddler. Temin’s main point is that what he calls general equilibrium approaches to macroeconomics have a political agenda, but they hide that agenda behind an ideology of naturalness. The “natural,” perfectly clearing, perfectly efficient economy, of course, has never existed and can never exist, but it is used to justify certain political prescriptions.

Temin quotes from a book review he wrote:

“Lurking behind these presumed inefficiencies appears to be a campaign for minimal government. Minimal government would not require many taxes as it would not have large expenditures; it would not interfere in labor markets, letting individual workers deal with large business firms as ordinary people deal with the grocery store. This is not an attractive place to live for some people, and this book appears to be supporting such an arrangement by stealth, rather than by direct argument.”

The belief that economics is a neutral science that operates according to immutable laws is one of the most powerful weapons in modern conservative ideology. Economics itself is a complex discipline that tolerates great diversity of method and opinion, yet somehow the “nightly news” version of economics can be summed up as “free markets good, government bad.” This is the naturalization of ideology — but that’s the whole point of ideology.